Pricing spread options with stochastic interest rates
type: Item
instance of: scholarly article
title: Pricing spread options with stochastic interest rates
zbMATH Open document ID: 1407.91253
DOI: 10.1155/2014/734265
author: Yunguo Jin
author: Shouming Zhong
published in: Mathematical Problems in Engineering
publication date: 2019-02-08T00:00:00Z
review text: Summary: Although spread options have been extensively studied in the literature, few papers deal with the problem of pricing spread options with stochastic interest rates. This study presents three novel spread option pricing models that permit the interest rates to be random. The paper not only presents a good approach to formulate spread option pricing models with stochastic interest rates but also offers a new test bed to understand the dynamics of option pricing with interest rates in a variety of asset pricing models. We discuss the merits of the models and techniques presented by us in some asset pricing models. Finally, we use regular grid method to the calculation of the formula when underlying stock returns are continuous and a mixture of both the regular grid method and a Monte Carlo method to the one when underlying stock returns are discontinuous, and sensitivity analyses are presented.
Mathematics Subject Classification ID: 91G20
Mathematics Subject Classification ID: 91G30
Mathematics Subject Classification ID: 60H30
zbMATH DE Number: 7017150
Wikidata QID: Q59071781
MaRDI profile type: Publication
full work available at URL: https://doi.org/10.1155/2014/734265
OpenAlex ID: W2056618284
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description: scientific article; zbMATH DE number 7017150